Connacher Reports Year-End 2012 Reserves

CALGARY, Feb. 13, 2013 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX)
reported today that as of December 31, 2012 its estimated proved ("1P")
bitumen reserves, as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ"),
independent qualified reserves evaluators, totaled approximately 214 million
barrels. 1P bitumen reserve volumes have increased by 22 per cent, over
year-end 2011 volumes, after production of 4.3 million barrels during the
year, due largely to the approval of the Great Divide Expansion Project. The
ten per cent present value ("10% PV") of 1P bitumen reserves is approximately
$1.0 billion.
Proved and probable ("2P") reserve volumes totaled approximately 451 million
barrels of bitumen. 2P bitumen reserve volumes decreased by approximately 10
per cent, due primarily to the implementation of an updated GLJ recovery model
for estimating future recoverable volumes and pad performance. The ten per
cent present value of 2P bitumen reserves decreased to approximately $1.8
billion, due primarily to increased estimated future capital costs, adjusted
near-term production forecasts and lower future commodity prices, as estimated
by GLJ.
Detailed information included in the GLJ December 31, 2012 report ("Year-End
2012 Report") regarding Connacher's bitumen reserves and resources and
associated present values are set forth in the tables below, including a
comparison of year-end 2012 results to year-end 2011 results. The Company
disposed of all of its conventional oil and natural gas reserves during 2012.
The Year-End 2012 Report was prepared using assumptions and methodology
guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGE
Handbook") and in accordance with National Instrument 51-101 ("NI 51-101").
Comparisons provided herein with respect to Connacher's bitumen reserves,
bitumen resources and for 10% PV for December 31, 2012 are to estimates
contained in the report, prepared by GLJ, with an effective date of December
31, 2011 ("Year-End 2011 Report").
Connacher owns a 100 percent working interest in approximately 87,000 net
acres of oil sands leases, primarily located at its Great Divide project in
Northeastern Alberta, situated 80 kilometers southwest of Fort McMurray.
Numerous oil accumulations in the McMurray formation have been identified for
continuing and future development on Connacher's properties.
Connacher's first steam-assisted gravity drainage ("SAGD") project at Great
Divide, Pod One, has been producing bitumen since late 2007, with commercial
production commencing March 1, 2008. Algar commenced producing bitumen in
August 2010 and commerciality was achieved October 1, 2010. Production from
both projects since startup through December 31, 2012 has totaled
approximately 17 million barrels of bitumen. Such amounts have been deducted
from earlier estimates of proved reserves prior to the calculation of reserves
as at December 31, 2012.
Unless otherwise stated, reserves refer to reserves of bitumen. Resources
refers to bitumen resources. Future net revenue is calculated after the
deduction of forecast royalties, operating expenses, estimated future capital
expenditures and well abandonment costs, but before corporate overhead or
other indirect costs, including interest and income taxes, from forecast
revenue. The 10 percent pre-tax present value of future net revenue is also
referred to as "present value" or "PV". Certain amounts cited herein have been
rounded for presentation purposes. Outstanding financial hedges were not
included in the evaluation. The GLJ Year-End 2012 Report was prepared
utilizing the GLJ January 1, 2013 price forecast, effective December 31, 2012.
Readers are referred to the notes to the Summary Tables included in this press
release for details regarding the price forecast used by GLJ. Earlier
reports were prepared using the price forecasts then being applied by GLJ.
Future net revenues disclosed herein do not represent fair market value. Also,
estimations of reserves, resources and future net revenue discussed in this
press release constitute forward looking information. See "Forward Looking
Information and Reserves Advisory" below.
Additional details regarding Connacher's projects and development
opportunities at Great Divide can be accessed at www.connacheroil.com or
www.sedar.com. Furthermore, additional information regarding Connacher's
reserves and resources, including the Company's interest in the resources and
the risks and the level of uncertainty associated with the recovery of the
resources, can be found in the Company's annual information form ("AIF") dated
March 16, 2012. This AIF can be accessed at www.sedar.com. The Company will
be filing an updated AIF later this year and prior to March 31, 2013, once it
has completed the audit of its financial and operating results for the
year-ended December 31, 2012 and has released them to the public. This is
anticipated to occur on March 27, 2013.
About Connacher
Connacher Oil and Gas Limited is a single purpose company active in the
development, production and sale of bitumen. The Company's principal assets
are holdings in the Great Divide oil sands project in northern Alberta, south
of Fort McMurray.
Summary Tables
Amounts presented are working interest volumes which are the Company's working
interest (operating or non-operating) share before deducting royalties and
without including any royalty interests of the Company.
Bitumen Reserves and Resources (thousand bbls)
31-Dec-11 31-Dec-12
Proved Producing 25,080 19,931
Total Proved Reserves (1P) 175,185 214,009
Probable 325,640 237,393
Proved and Probable Reserves (2P) 500,825 451,402
Proved, Probable & Possible (3P) 605,687 569,303
Best Estimate Contingent Resources 174,692 61,989
10% Present Value of Future Net Revenue
Bitumen Reserves and Resources - Before Tax
Dec-11 Dec-12
$MM $MM
Proved Producing 528 320
Total Proved Reserves (1P) 1,110 1,009
Probable 1,302 749
Proved and Probable Reserves (2P) 2,412 1,758
Proved, Probable and Possible (3P) 3,127 2,444
Best Estimate Contingent Resources 127 61
Before Tax Present Value ($MM)
0% 5% 8% 10% 12%
Proved Producing 433 368 337 320 304
Total Proved 4,041 1,917 1,291 1,009 798
Proved plus Probable Producing 699 579 523 491 463
Total Proved plus Probable 9,853 3,799 2,349 1,758 1,344
Total PPP 14,455 5,313 3,259 2,444 1,880
Notes:
1) Proved Reserves are those reserves that can be estimated with a
high degree of certainty to be recoverable. It is likely that
the actual remaining quantities recovered will exceed the
estimated proved reserves.
2) Probable Reserves are those additional reserves that are less
certain to be recovered than proved reserves. It is equally
likely that the actual remaining quantities recovered will be
greater or less than the sum of the estimated proved plus
probable reserves.
3) Possible Reserves are those additional reserves that are less
certain to be recovered than probable reserves. It is unlikely
that the actual remaining quantities recovered will exceed the
sum of the estimated proved plus probable plus possible
reserves. There is a 10% probability that the quantities
actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves.
4) Contingent resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable
from known accumulations using established technology or
technology under development, but which are not currently
considered to be commercially recoverable due to one or more
contingencies. These resource estimates are not currently
classified as reserves, pending further reservoir delineation,
project application, facility and reservoir design work,
preparation of firm development plans and Company approvals.
Contingent resources entail additional commercial risk than
reserves and adjustments for commercial risks have not been
incorporated in the summaries set forth herein. There is no
certainty that it will be commercially viable to produce any
portion of the contingent resources.
5) Best Estimate: this is considered to be the best estimate of
the quantity that will actually be recovered. It is equally
likely that the actual remaining quantities recovered will be
greater or less than the best estimate. If probabilistic
methods are used, there should be at least a 50 percent
probability that the quantities actually recovered will equal
or exceed the best estimate.
6) Does not include bitumen resources or undeveloped land value.
7) Pricing assumptions in the Year-End 2012 Report were as
follows:
NYMEX Light Edmonton AECO
WTI Sweet WCS @ Pentane Spot
Inflation Exchange Current Edmonton Hardisty Plus Current
Year % Rate US$/bbl C$/bbl C$/bbl C$/bbl C$/Mscf
2013 2.0 1.0 90.00 85.00 70.13 96.63 3.38
2014 2.0 1.0 92.50 91.50 76.15 97.91 3.83
2015 2.0 1.0 95.00 94.00 78.22 97.76 4.28
2016 2.0 1.0 97.50 96.50 80.29 100.36 4.72
2017 2.0 1.0 97.50 96.50 80.29 100.36 4.95
2018 2.0 1.0 97.50 96.50 80.29 100.36 5.22
2019 2.0 1.0 98.54 97.54 81.16 101.44 5.32
2020 2.0 1.0 100.51 99.51 82.79 103.49 5.43
US$/CDN$ exchange rates were .98 in the Year End 2011 Report and 1.0 in the
Year End 2012 Report.
8) Tables may not add due to rounding.
Forward Looking Information and Reserves Advisory
This press release contains forward looking information, including but not
limited to estimated reserves and resources and future net revenues associated
therewith and the proposed timing of the release of the Company's Annual
Information Form for the year ended December 31, 2012. The forward looking
information is based on current expectations that involve a number of risks
and uncertainties, which could cause actual results to differ materially from
those anticipated. These risks include, but are not limited to risks
associated with the oil and gas industry (e.g. operational risks in
development, exploration and production delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve and resource estimates; the uncertainty associated with
geological interpretations; the uncertainty of estimates and projections in
relation to production, costs and expenses and health, safety and
environmental risks), the risk of commodity price and foreign exchange rate
fluctuations, risks associated with the implementation of new technology,
risks associated with obtaining, maintaining and the timing of receipt of
regulatory approvals, permits, and licenses, uncertainties relating to access
to capital markets and the risk of volatile global economic conditions.
Additional risks and uncertainties are described in the Company's Annual
Information Form which is filed on SEDAR at www.sedar.com.
This press release includes information pertaining to the reserves, resources
and the value of future net revenue of the Corporation as at December 31, 2012
and December 31, 2011 as evaluated by GLJ in its reports dated February 6,
2013 and February 16, 2012, respectively (together the "GLJ Reports").
Statements relating to reserves and resources are deemed to be forward looking
information, as they involve the implied assessment, based on certain
estimates and assumptions, that the reserves and resources described exist in
the quantities predicted or estimated, and can be profitably produced in the
future. The GLJ Reports are based on a number of assumptions relating to
factors such as initial production rates, production decline rates, ultimate
recovery of reserves, timing and amount of capital expenditures, marketability
of production, future prices of bitumen, crude oil, natural gas liquids and
natural gas, operating costs, anticipated reductions in SORs and operating
costs as a result of installation of pumps in certain wells to improve
productivity, well abandonment and salvage values, royalties and other
government levies that may be imposed during the producing life of the
reserves. Moreover, there is no assurance that the forecast price and cost
assumptions contained in the GLJ Reports will be attained and variances could
be material. The reserves and resources estimates of Connacher's properties
described herein are estimates only. The actual reserves and resources on
Connacher's properties may be greater or less than those calculated. The
present value of estimated future net revenues referred to herein should not
be construed as the fair market value of estimated bitumen, crude oil, natural
gas and natural gas liquids reserves attributable to Connacher's properties.
Contingent resources disclosed herein were assigned in regions with lower
core-hole drilling density than the reserve regions and a portion of the
contingent resources are located outside Connacher's current areas of approval
for development. These resource estimates are not classified as reserves at
this time, pending further reservoir delineation, project application,
facility and reservoir design work, preparation of firm development plans and
company approvals. Contingent resources are considered sub-commercial and the
chance of commerciality is equal to the chance of development. Conversely, the
chance of commerciality for reserves is effectively 100 per cent. Adjustments
for commercial risks were not incorporated in the estimates of contingent
resources set forth herein. A range of Contingent Resource estimates (Low,
Best and High) were prepared to reflect a range of technical uncertainty. Low
Estimate Contingent Resources were assigned to mapped regions of oil - in-
place of identified pods with lower core-hole drilling density than the
reserve regions and with at least 12 m of continuous bitumen pay along with a
conservative estimate of recovery factor. Best Estimate Contingent Resources
were assigned to mapped regions of oil-in-place of identified pods with lower
core-hole drilling density than the reserve regions and with at least 10 m of
continuous bitumen pay along with a best estimate of recovery factor. High
Estimate Contingent Resources were assigned to mapped regions of oil-in-place
of identified pods with lower core-hole drilling density than the reserve
regions and with at least 9 m of continuous bitumen pay along with a more
optimistic estimate of recovery factor. There is no certainty that it will be
commercially viable to produce any portion of the Contingent Resources.
Due to the risks, uncertainties and assumptions inherent in forward looking
information, prospective investors in the Company's securities should not
place undue reliance on forward looking information. Forward looking
information contained in this press release is made as of the date hereof and
are subject to change. The Company assumes no obligation to revise or update
forward looking information to reflect new circumstances, except as required
by law.
Kelly J. Ogle or Greg Pollard Phone: (403) 538-6201 Fax: (403)
538-6225 inquiries@connacheroil.com Website:www.connacheroil.com
SOURCE: Connacher Oil and Gas Limited
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CO: Connacher Oil and Gas Limited
ST: Alberta
NI: OIL